2014年-EBA欧洲银行管理局_JC_2014_004_28Final_Report_Mechanistic_References_to_Credit_Ratings29_31页_767kb

Summary of EBA, EIOPA and ESMA Final Report on Mechanistic References to Credit Ratings

Overview

This report addresses the issue of mechanistic references to credit ratings in the guidelines and recommendations of the European Banking Authority (EBA), European Insurance and Occupational Pensions Authority (EIOPA), and European Securities and Markets Authority (ESMA). The new Article 5b(1) of the Credit Rating Agencies (CRA) Regulation, as amended by the CRA3 Regulation, mandates that these authorities should not refer to credit ratings in their guidelines, recommendations, and draft technical standards if such references could lead to sole or mechanistic reliance on credit ratings by competent authorities, sectoral competent authorities, entities under Article 4(1), or other financial market participants.

The report also includes an impact assessment (Annex I) and a list of references to credit ratings in the Solvency II Directive (Annex II). The three ESAs have reviewed all existing references to credit ratings in their guidelines and recommendations, and have identified which ones are not considered sole or mechanistic and which ones require revision.

Feedback Statement

The Joint Consultation Paper (JCP) received 22 responses, with 21 addressing the definition of 'sole or mechanistic reliance', 18 responding to the proposed actions on EBA and ESMA guidelines, and 16 providing feedback on the proposed revision of ESMA's MMF Guidelines.

• The definition of 'sole or mechanistic reliance' was generally accepted by stakeholders, though some suggested refinements to avoid misinterpretation.
• The proposed action to remove mechanistic references to credit ratings was widely supported.
• Some credit rating agencies expressed concerns that the wording in the JCP might suggest a ban or prohibition on the use of credit ratings, which the ESAs clarify is not the case.

Definitions

• CRA Regulation: Regulation (EC) No 1060/2009, amended by Regulation (EU) No 513/2011 and Regulation (EU) No 462/2013.
• National competent authorities (NCAs): Defined in Article 3(1)(p) of the CRA Regulation.
• Sectoral competent authorities (SCAs): Defined in Article 3(1)(r) of the CRA Regulation.

Sole or Mechanistic Reliance

• Defined as an action or omission resulting from rules based on credit ratings without any discretion.
• This definition was adopted based on the understanding reached during CRA3 Regulation negotiations.

General Examples of Provisions with References to Credit Ratings

EBA Examples

• CEBS Guidelines on Stress Testing (GL32): Uses external ratings to infer rating migration based on internal risk parameters.
• High Level Principles for Risk Management: Allows institutions to set target credit ratings or returns.
• Guidelines on Operational Risk Mitigation Techniques: References credit ratings in assessing the claims paying ability of insurers.
• Compendium of Supplementary Guidelines on Operational Risk: Similar to above, referencing credit ratings in the context of insurance.
• Guidelines on the Application of the Supervisory Review Process under Pillar 2 (CPo3 revised): Encourages institutions to consider external rating goals alongside qualitative assessments.
• Revised Guidelines on the Recognition of External Credit Assessment Institutions: Provides a mapping between ECAI ratings and credit quality steps (CQS).

EIOPA Examples

• Solvency II Directive: Contains provisions referencing credit ratings, particularly in the context of spread risk and long-term guarantees.
• Cliff effects and BBB limits: The current design of spread risk capital charge is based on credit quality steps, which may lead to a cliff effect if an asset's rating drops below BBB.

ESMA Examples

• EMIR Regulation: Does not contain references to credit ratings in the regulation or its implementing measures.
• Prospectus: No guidelines currently adopted by ESMA contain references to credit ratings.

Guidelines and Recommendations NOT Considered as Sole or Mechanistic Reliance

EBA

• CEBS Guidelines on Stress Testing (GL32): Uses external ratings to infer rating migration, but does not require sole reliance.
• High Level Principles for Risk Management: Allows institutions to set target credit ratings, but also considers other qualitative factors.
• Guidelines on Operational Risk Mitigation Techniques: Uses credit ratings in assessing claims paying ability, but not as a sole basis.
• Compendium of Supplementary Guidelines on Operational Risk: Similar to above.
• Guidelines on the Application of the Supervisory Review Process under Pillar 2 (CPo3 revised): Encourages use of external rating goals, but also includes qualitative assessments.
• Revised Guidelines on the Recognition of External Credit Assessment Institutions: Provides a mapping framework, but allows for flexibility in capital requirements.

EIOPA

• No guidelines currently adopted by EIOPA contain references to credit ratings.

ESMA

• EMIR: No references to credit ratings in the regulation or implementing measures.
• Prospectus: No guidelines currently adopted by ESMA contain references to credit ratings.

Guidelines and Recommendations with Sole or Mechanistic Reliance and Proposed Action

EBA: Standardised Approach and Mapping

• Standardised Approach (SA): Banks use ECAI ratings to quantify capital requirements.
• Credit Quality Steps (CQS): Defined in the Solvency II Directive, and linked to ECAI ratings via a mapping process.
• Proposed Action:
  • EBA, EIOPA, and ESMA should review and remove all references to credit ratings in their guidelines and recommendations that could lead to sole or mechanistic reliance.
  • The mapping process should be revised to avoid mechanistic reliance.
  • The CRD IV introduces additional tools to reduce reliance on external ratings:
    • Encourages internal credit risk assessment for sophisticated institutions.
    • Allows supervisors to monitor reliance on credit ratings.
    • Requires the EBA to publish biannual reports on reliance on credit ratings.

Annexes

• Annex I: Impact assessment on reducing sole or mechanistic reliance on credit ratings.
• Annex II: References to credit ratings in the Solvency II Directive.